DOF to Speed up Creation of Single Guarantee Firm
The Department of Finance (DOF) has committed to speed up the merger of the Philippine Export-Import Credit Agency (PhiIEXIM) with other state-run guarantee firms and programs in compliance with President Duterte’s directive to consolidate them into a single corporate entity.
Carlos Dominguez III, finance secretary, said the presidential directive outlined in Executive Order (EO) No. 58 will be implemented by the DOF in coordination with the Land Bank of the Philippines, Development Bank of the Philippines (DBP), Department of Agriculture (DA), Housing and Urban Development Coordinating Council (HUDCC), and the Department of Trade and Industry (DTI).
Under EO 58, the DOF was tasked to carry out the merger of PhiIEXIM and Home Guaranty Corp. (HGC), and transfer to PhiIEXIM the guarantee functions, programs and funds of Small Business Corp. (SBC) as well as the administration of the Agricultural Guarantee Fund Pool (AGFP) and the Industrial Guarantee and Loan Fund (IGLF).
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All these state guarantee firms and funding programs will be consolidated into a single entity that will be renamed the Philippine Guarantee Corp.
With the consolidation, PhiIEXIM’s authorized capital stock will be increased from P10 billion to P50 billion and the equity contributions of the national government to the HGC, IGLF and AGFP will be transferred to PhiIEXIM to form part of its paid-up capital.
Any balance in the required paid-up capital, subject to the DOF’s prior coordination with the Department of Budget and Management, will be charged as capital infusion from the national government to be sourced from the annual General Appropriations Act.
To clean up PhilEXIM’s balance sheet through the spin-off of its non-performing assets and outstanding loans, the President also directed that the firm be authorized to establish its own subsidiary corporation functioning as board of liquidators to manage its non-performing assets, collect its receivables, recover and dispose of its acquired assets, manage and settle its outstanding loans and administer its default contingent accounts.
“The merger of the HGC and PhilEXIM, with the PhilEXIM as the surviving entity, and the transfer of the guarantee functions, funds and programs of the SBC, and the administration of the AGFP and IGLF to the PhilEXIM, are in accordance with the goal of ensuring sound macroeconomic policy through fiscal, monetary and trade policies that will work towards stability, inclusivity, competitiveness and resiliency of the economy under the Philippine Development Plan 2017-2022,” the EO stated.
The President said the move to consolidate all state guarantee firms and programs into a single entity will benefit from economies of scale; prevent operational redundancies; standardize policies, processes and procedures for similar guarantee facilities and programs; facilitate timely approvals; and lower administrative costs.
He also said the pooling of resources provided under the different guarantee mechanisms will lead to a more efficient allocation of government contributions.
Under this centralized approach, “the national government will have a more comprehensive oversight of its guarantees to effectively identify, monitor and control risks, implement necessary measures to manage risks and provide appropriate capital against those risks,” the EO stated.
PhilEXIM, which is attached to the DOF, provides credit, credit insurance and guarantee facilities primarily to export-oriented industries, including small and medium enterprises (SMEs).
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HGC, which is attached to HUDCC, guarantees the payment of mortgages, loans and other credit facilities arising from financial contracts for residential purposes.
Under the DA’s supervision, AGFP is intended to mitigate risks involved in agriculture lending and facility credit in the agriculture sector, while the DBP-supervised IGLF provides relending and guarantee facilities for SMEs.
SBC, which is under DTI, implements policies and programs to help micro, small and medium enterprises.